State regulators slapped Blue Cross Blue Shield of Alabama last month with an $8 million penalty for charging rates that differed from those approved by the Alabama Department of Insurance from 2005 to 2013.

The charges investigated by the department occurred in about 1,400 plans issued to small group employers - those with two to 50 employees - and some COBRA plans for former employees. Company officials have said the rate variations were tied to a policy that was intended to reduce the shock of large rate increases and resulted in savings for most customers. However, attorneys suing the company for alleged anti-trust violations said the practice violated state laws that require rates to be filed and approved by insurance regulators.

"The goal was to smooth rate adjustments over time and provide small employers more predictability in their business planning," according to a statement issued by Blue Cross Blue Shield of Alabama. "We believed these practices were beneficial overall to our small business customers."

The rate variances resulted in undercharges of almost $107 million and overcharges of almost $33 million, according to the order issued on Aug. 16 by the Alabama Department of Insurance.

The department has been investigating Blue Cross' small group and COBRA charges since February. The $8 million assessment, as it was described in the order, was levied because the company failed to inform the department of insurance about its methods for raising or reducing rates.

"Within 60 days of the date of this Order, Blue Cross shall pay the amount of $8,000,000 to the Commissioner of Insurance as an assessment for Blue Cross' oversight in not filing its renewal rating methodology with the Department pursuant to [Alabama law]," the order read. "This assessment is a result of Blue Cross' inability to reasonably conduct variance analysis outside of the study period due to incomplete data."

In the statement, Blue Cross officials said its rate-stabilization practices were common in the health insurance industry and ended in 2014.

"Although premium rate stabilization efforts are common insurance practices, we mistakenly did not document these practices in our Small Group rate filings," the statement read. "We also did not adjust the rating category for some small business customers when their annual employee health insurance enrollment fluctuated from the previous year."

The company must also pay $100,000 to the department for costs related to the investigation.

The Blue Cross Blue Shield statement reported that refunds have been made to more than 1,400 small business customers and 2,200 COBRA customers. The company will not seek reimbursement from customers who were undercharged. Customers who believe they were overcharged by the company can make a claim to the Alabama Department of Insurance within the next two years.